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In its editorial âPension madnessâ (Our Views, June 7), The Press-Enterprise stated that SB 1234 â" the California Secure Choice Retirement Savings Act â" could put âstate finances at risk.â Not only do I disagree with that, but it ignores the pending calamity of millions of private-sector workers retiring into poverty â" a risk none of us can afford.

As the editorial correctly points out, there are approximately 7 million private-sector workers, mostly low-to-middle income, with no access to a retirement plan at work. Nearly 50 percent of those workers face living in or near poverty during their senior years. While this problem affects a broad cross-section of Californians, it hits women particularly hard. Two-thirds of the seniors living in poverty today are women. Longer life expectancies, interrupted careers due to raising children and caring for elderly parents, and the fact that the median earnings for women working in the private sector are 24 percent less than those of their male counterparts â" all result in women having lower levels of retirement savings, and being at high-risk of falling into poverty when they can no longer work.

All told, California has a retirement income deficit of more than $600 billion, which is the difference between what we have saved and what we need to save for even a minimal standard of living in retirement. With our aging population, we must act now to begin tackling that deficit or we will be financially overwhelmed by it in the decades to come.

The biggest misnomer about SB 1234 is the suggestion of potential state liability. First, the stateâs constitution prohibits such liability, and second, the bill provides clear and incontrovertible language that indemnifies the state. Contrary to conjecture otherwise, the state has clear and well-defined authority to limit liability in contractual arrangements such as this and has done so in this measure.

While I understand that itâs essential to protect the state from liability, our primary focus now must be ensuring that if we create a public-private partnership similar to ScholarShare (our college savings plan that currently manages more than $4.5 billion), that the retirement plan minimizes risk, provides a modest rate of return that is regularly evaluated, and is properly insured, so that liability never becomes an issue. In other words, creating a product that can withstand a multi-year down-cycle like that during the last decade, which was the worst since the Great Depression. This product will be privately underwritten to provide participants stronger protections on their investments than other insurance products currently available on the market today. Thatâs the goal, and thatâs what we must achieve.

To accomplish this, a board of investment experts led by the stateâs three statewide fiscal watchdogs â" the state treasurer, the state controller and the director of finance â" will commission a market study to evaluate the feasibility and sustainability of such a program. Only if that detailed report, which will model and test the proposal, determines that it is both feasible and sustainable without taxpayer support, can the board give the green light to designing and marketing such a product to workers without a workplace retirement plan.

Itâs important to note that this is no Cadillac retirement plan. Itâs designed for one purpose: to provide workers with a reliable and portable plan that will supplement their Social Security so they donât slide into poverty when they need to retire. The rate of return will be closely tied to the 30-year Treasury bond rate, which has never gone negative in its entire history.

Furthermore, the rate of return would be adjusted each and every year according to its previous yearâs performance and the overall fund health. Unlike traditional pension plans that are based on a formula of age, years worked and contributions over time, this account will operate more like a traditional savings account with an interest rate that is calculated annually. That annual interest rate adjustment acts as a safety valve.

Ensuring that all workers have the opportunity to save for retirement will benefit all of society â" in addition to promoting personal responsibility and providing Californians with a pathway to self-sufficiency in retirement.

Kevin de Leon, D-Los Angeles, represents the 22nd District in the California Senate.

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